Application of Decision Trees to Product Design

1
Application of Decision Trees to Product Design

• Particularly useful when there are a series of
  decisions and outcomes which lead to other
  decisions and outcomes

2
Application of Decision Trees to Product Design
Procedures

• Include all possible alternatives and states of
  nature - including doing nothing
• Enter payoffs at end of branch
• Determine the expected value of each branch and
  prune the tree to find the alternative with the
  best expected value

3
Decision Tree Example
Figure 5.14
4
Decision Tree Example
EMV (purchase CAD system) (.4)(1,000,000)
(.6)(- 20,000)
Figure 5.14
5
Decision Tree Example
EMV (purchase CAD system) (.4)(1,000,000)
(.6)(- 20,000)
388,000
Figure 5.14
6
Decision Tree Example
Figure 5.14
7
Transition to Production

• Know when to move to production
• Product development can be viewed as evolutionary
  and never complete
• Product must move from design to production in a
  timely manner
• Most products have a trial production period to
  insure producibility
• Responsibility must also transition as the
  product moves through its life cycle